Excellent extended study of the mortgage meltdown by Stan Liebowitz, Independent Institute. (thanks Tom DiLorenzo)
Source link: http://blog.mises.org/8702/anatomy-of-a-train-wreck/
Anatomy of a Train Wreck
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I would very much like one of you guys to take a listen to the “This American Life” episode titled “Giant Pool of Money”:
http://www.thislife.org/Radio_Episode.aspx?episode=355
I’d like to know what you think about it and whether or not the analysis is worthy of consideration.
Brian D. asks: “I would very much like one of you guys to take a listen to the ‘This American Life’ episode titled ‘Giant Pool of Money.’”
I didn’t listen to the whole thing, but the fifteen minutes of it I could stand to listen to while driving tried to blame the whole thing on the fact that credit default swaps weren’t regulated. There was zero attention to any possible blame the government might possibly deserve in creating this disaster.
Beyond that, as expected, they did the “we’re the responsible, level-headed, benevolent grownups around here, and we know how politically unpopular it is, but we’re here to tell you the bailout was the only reasonable option” spiel.
Just infuriating.
This was an interesting discussion of some of the factors which went into the mortgage bubble, but I carefully searched for some analysis of the effect of Federal Reserve fiat money price fixing on the creation of the bubble.
Nothing there. We cannot understand the bubble — and the crash — without understanding what the Fed has done to the dollar.
Nor can we understand the cure for the disease without a diagnosis that looks to root cause: in this case, the socialization of interest rates through Fed price fixing.
END THE FED!
http://www.endthefed.us
Liebowitz explanation is very interesting and can easily (and favorably) be reinterpreted in an Austrian framework: lowering of the interest rate incited speculators to buy houses with adjustable rates, and when “the housing bubble stopped growing” it became increasingly difficult to pay off the loans, whence the defaults and the crisis. The difference is that in the Austrian cycle theory the release of the crisis would be related to the increase in interest rates in the few preceding years.
With reference to “credit default swaps weren’t regulated.”
There have been several people I’ve talked to who blame this mess on “deregulation of the banking industry”.
I’m left wondering where this particular meme is coming from, since it has no basis in reality what so ever.
Curt: I’ve met some people like that, at whom my first reaction was to laugh.
My second reaction was, “Oh, wait, you’re not joking?”
And after a soft silence, “Are you trolling me?”
It’s the same meme that was used to convince the country it needed the Federal Reserve in the first place…
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